gwen: democracy's tests on the streets of jinlt. and in the halls of ng congress, the president defends the state of the union. tonight on "washington week". >> the egyptian government needs to engage immediately with the egyptian people. gwen: but that's not happening this week. thousands took to the streets, challenging an old, staunch u.s. ally. this foreign policy test joins the president's domestic policy tests. >> we need to outinnovate and outbuild the rest of the world. we need to make america the best place on earth to do business.

gwen: and amid fresh promises to tackle immigration reform and roll back tax cuts -- zpr before we take money away from our students, we should ask millionaires to give up tax breaks. gwen: they were polite in the room but not necessarily in agreement afterwards. >> unfortunately the president sent a very mixed message last night as far as i'm concerned. >> using the word "invest" in this town means more federal spending. gwen: dealing with these issues here and abroad with nancy youssef of mcclatchy newspapers, jackie calmes of "the new york times," susan daves "the national journal" and john dickerson of slate is -- slate magazine and cbs news. >> live from our nation's capital, this is "washington

week with gwen ifill." produced in association with "national journal." corporate funding for "washington week" is provided by -- >> we know why we're here. to connect our forces to what they need, when they need it. >> to help troops see danger before it sees them. >> to answer the call of the brave and bring them safely home. >> around the glow, the people of boeing are working together to support and protect all who serve. >> that's why we're here. >> a line is a powerful thing. it connects the global economy to your living room, cleanler -- cleaner air to stronger markets, factory floors to less crowded roads. today's progress to tomorrow's

promise. norfolk southern, one line, infinity possibilities. >> corporate funding for "washington week" is provided by -- prudential financial. additionalal funding for wolfpack swook provided by the annenberg foundation, the corporation for public broadcasting, and by contributions to your pbs station from viewers like you. thank you. live from our nation's capital, this is "washington week" with gwen ifill, produced in association with "national journal". gwen: good evening. we begin tonight with the dramatic events in egypt and the ramifications they may have for u.s. policy in the region. the white house call the protests a very fluid and dynamic situation. that proved true today when president mubarak said his cabinet would resign but he would not. >> there's a fine line that

separates freedom an chaos. i'm absolutely on the side of freedom of each citizen in press -- expressing our opinions and at the same time i am on the side of the security of egypt and i would not let anything dangerous happen that would threaten the peace and the law and the future of the country. gwen: presidents mubarak and obama spoke right after that. then the president made his own statement at the white house. >> i told him he has a responsibility to give meaning to those words, to take concrete steps and actions that deliver on that promise. violence will not address the grievances of the egyptian people, and suppressing ideas never succeeds in making them go away. when i was in cairo shortly after i was elected president i said that all gotchts must maintain power through -- all governments must maintain power through consent, not coercion.

that is the single standard by which the people of apology. will achieve the future they deserve. gwen: for most americans this was all brand-new. where did these protests spring from, nancy? and did the united states see them coming? >> yes and no. in a way that he are 30 years in the making, the years of mubarak's rule. there's been a greater disparity between rich and poor during that time. a whole youthful population can go to school and do good things yet has no opportunities. you have a country where 60% of the population lives under the poverty line which by the world bank standards are $2 a day. what surprised the white house was the pace at which this happened. that was really i think drawn out by tunisia. the protests tuesday were small and started to die down. but today when people gathered

at friday prayers and heard their clerics telling them to go out and fight for their country, people saw the first opportunity they had ever seen in their lives in many cases to maybe bring about change. gwen: watching the president grapple with this, the add minute strarkse it seems as if they couldn't quite find their footing, especially since hosni mubarak is such a key ally for them in that region. >> that's right. they're trying to walk a very fine line. they promote popular movements and grass roots and at the same time they've depended on egypt heavily especially in the mideast peace process. so how do you support a movement that would remove a very key ally and in fact could put in someone who is a foe to the gofpbletse united states? >> what's the makeup of this? is it a religious-led protest in the street?

or are there other things motivating people? >> it's a great question because the muslim brotherhood, the largest organized sort of opposition group in apology. , really didn't come out for this movement, so it didn't seem to be as much a religious driven movement. i think more than anything it was a youth driven movement. earlier in the week before facebook and twitter and the internet were cut off, people were reaching out, encouraging others to take part. i think it's fair to say it's a mix but really primarily a youthful one. gwen: i think it's important to point out your family is from egypt and when you say "we," that's what you are talking about? >> i'm sorry. that's right. my parents are from egypt president i've been going there my whole life. the tension there is right bloat surface. people begging for money. men with tremendous pride, beg you for a dollar. it's something i never thought

i would see in my lifetime. it's been extraordinary. >> nancy, we saw in george bush's administration that he promoted democracy movements throughout the middle east and that was partially his rationale for going to war in iraq. then they -- we saw that several countries when they did have elections, islamist groups took over and it wasn't exactly what the u.s. wanted. >> that's right. >> is that what is most likely to happen here should mubarak fall from power? >> you know, you raise a good point, by -- which is we don't know who would go in this in his place. we've heard a flot about mohammed elbaradei but he's more popular outside egypt than within. he's seen as an outsider, too much of a second eulogy arist. gwen: what about his son, gem snal >> these protests are as much

about mubarak's son as him so to replace him with his son is not an option. you are hearing they want him noum -- out but not who they want in his place. you talk to iraqis now and they say gosh, we wish what is happening in tunisia and egypt had happened here. in iraq, it's not seen as a democratic movement but as an occupation. >> what role did wiki leaks play? >> well, the president and his wife were, in tunisia, so off the entatious about their wealth and a number of wiki leaks cables came out outlining this. and tea risk of being crass, they thought it, my goodness,

even the american government can see this. tunisia was a huge wakeup call to the egyptians that really, we the people can bring about movement. it's seen as a real small window that people feel com 3e8d to try to take advantage of. gwen: we're going to come back to this in our webcast after the program. nancy, thanks. we turn now to the domestic issues. the state of the union speech set stadium for what is sure to be a series of tests. which fight is the president willing to fit? immigration? tax cuts? health care? >> i have heard rumors that a few of you still have concerns about our you -- new health care law. so let me be the first to say that anything can be improved. if you have ideas about how to improve this law by making care better or more affordable, i am eager to work with you.

gwen: so how will republican priorities may out within the g.o.p. and without? >> health care spending is driving the explosive grouskt our debt and the president's law is accelerating our country toward bankruptcy. gwen: and how will tuesday's bibes -- bipartisan kum-ba-ya moment last? >> well, that moment was fine. what's striking is you have the republicans still feeling strong after their election momentum but the president is also feeling his own momentum. his approval rating is up. he's reorganizing the white house. and you are seeing the discussion about how to shrink government this year and on into the election. the president made the case that we're in a turning point in this country. we need to adapt if we're not going to fall behind china and india. the republicans are saying just

the opposite, we need, we don't need more government, we need less. we need the clog of government out of the commern me -- of the american economy so the economy could do all these great things. in his speech he talked a lot about source -- sort of the american dream and the american dream of prosperity being not available to anybody. things had changed, he said. then the minute he said that, he got into this huge pep rally mode, talking about how america had always in its history been able to turn around at this point. sort of singing the song of america. i was pressing the white house officials, what about the details, and he got irritated and said that's not what this is about. it's about kids that are worried their kids aren't going to have a future. the president was trying to reach to that and say i have a plan for the future and here's what it is.

even more in this new moment. gwen: let's all talk now about what the intent was. often these set moments in washington are as much about intent and execution. on capitol hill where they sat side by side, what was the intent of that set moment? >> i think the president hit a really good tone in the sense that he said nothing divisive in his speech. he gave his political opponents very little ammunition to come out that night or the next morning and say he's here, we're here. essentially the republicans said we like everything he said, we're just not sure he believes it be to the extent we do. the acceleration of the fight is going to be quick, in a couple weeks. the president is going to put down his budget and outline his priorities and the house republicans are going to outline a bill to fund the federal government that's going to cut in the neighborhood of $ 60 billion and the rubber's

going to meet the road. the republicans in the house have been almost obstinate. they're not moving. you heard eric kantor said earlier, i think part of the president's strategy is to spend, that invest is code for spending and he said no, no spending. gwen: but i heard him talk about leveling the playing field and he wasn't talking about civil rights but about the tax code, i thought that's an interesting link. he was bring up at the same time things like immigration reform that he didn't need to bring up. >> in fact the business community is for immigration reform and for a lot of the things he was talking about in terms of increased spending, for infrastructure in particular, education as well, certainly research and the president knows that and he knows, he was sort of putting the republicans in a box in a way. i mean he knows -- he knows --

the state of the union speech wasn't as specific as certainly we're used to under president clinton or under most presidents. partly because president obama's gotten some big innings accomplished in the past two years -- big things accomplished in the past two years but also he's playing defense now. they're calling for the big spending cuts, but he p haven't put the specifics to it. so the president was sort of, you know, tweaking that a little further by making the case with a national audience for why some spending is good spending, it's investments. >> as i was talking to somebody in republican house leadership, they were saying that after the speech the president got to lock like. optimistic guy and then we came afterwards, president republican budget chairman, and he's the guy who is going to enslave your children, you know? they are left talking about specifics and all the specifics are hard and painful and the

president talked a lot haft year about how this year would be all about hard choices, the big, painful conversation. now he's moved off that. he did talk about freezing spending five years to save $400 billion. >> which is two years on top of the three he previously said. >> right. doubling down -- gwen: that didn't happen, by the way, because the been never got 0 them -- him. >> it was the bare minimum he could offer in this stage to be taken seriously. but there is a lot more to be done. he leaves president talk between the establishment republicans who are saying we want to cut a lot and the tea party republicans saying we want to cut even more. gwen: was that really a kiss agreement between the tea party republicans and establishment republicans? >> i think it's a question of how far they want to go. the republican positioning is we believe the american people are trod feel the pain. paul ryan, the house been

committee chairman has said it. hence article irning -- hensarling has said it. i think it's a really interesting question when we're used to politicians saying "we're going to help you, give you something, suss," and the republican party is essential le saying we're not going to help you. we're going to make life a little more difficult, but we believe you are with us on this. i think thts -- that's a fascinating political gamble to take. gwen: and the gam -- gamble the white house is taking is that people don't really mean that? >> right. >> having lived through the gingrich revolution and covering congress and the difficulty they've had, the i think the administration is probably right to bet that the republicans are going to be in a bad place on this. >> and at the end of the day the president is goinging to judged on the economy. he'll never be able to out-cut

a republican and in the end, if the me and bad he can, if he says i cut aught this stuff, people aren't going to give him any credit for it. the economy is good or bad and he's never going to outdo them. in the end he will be able to say at least he was optimistic. >> is there any point where the economy can be good enough for the president? is it good, bad, or is moderate improvement enough for him politically speaking? >> well, that's the big question. the unemployment rate, 9.4%, if it's down to 8 -- >> still incrediblely high. but he can say things have improved. his hope is that some of this stuff will be at least get us moving in that direction. since we're talking about the state of the union, i don't want to let us forget it was in haft year's state of the union that in order to prove his

fiscal conservative bona fides the president proposed a bipartisan fiscal commission. it reported in december. didn't get enough votes on the committee to force a vote in congress as the president proposed but it got a majority, way -- which was more than most expected. or this state of the union you would expect that the president would have come out and said embrace it or propose an alternative. and he didn't -- you know, that was a comprehensive plan, overhauling the tax codes to raise revenues and simplify the code, cutting military and domestic spending, reforming the entitle ment programs and social security. none of that. we'll never know if he would have done that had the democrats retained congress but now the republicans are in charge they need to first put some cards down. it would not be milley wise for

him to do so, and so he didn't. gwen: but i was also struck, and nancy, tell me if you noticed this too, he's still a wartime president and theres is -- was only a passing glance in reference to the war in afghanistan. i was thinking back to the whole egypt thing. it was at a speech in cairo that he promised to close guantanamo in a year and than hasn't happened either. >> we've got over 100,000 troops in afghanistan. we've had the promise of guantanamo bay closing for over a year and that silence on wartime issues was i think startling for some people because he may have moved beyond it in some ways politically, but it's a very real issue and they have that july 2011 deadline looming over ome -- them to prove progressing in faffing -- afghanistan. so to not hear anything about that, it was like living in two worlds in washington. 9 one in the pentagon and the

one in the building. gwen: and the effort to cross party lines created a different feeling in that room. there was not the jumping up and down to applaud things you agree with. it was almost like people were afraid to applaud anything at length. therefore it was a much more serious speech. >> leading up there was a lot of bad dating meat -- metaphors, you know, who is your date going to be for the evening? i will say people who even had cynicism going into it in private, it got positive reviews. i had staffers emailing saying i know i was making fun of it but you can palpably feel the difference in the room. people are being more grown, taking it more seriously. gwen: i felt the same thing, even though i was president in the room. many does than last or was it a

good moment? >> it doesn't last. but the president in his speech said we're going to have big clashes. we're talking about the central philosophical debate between the two parties, the shape of government and priorities. if up can't have a fight -- fight about that, what do you have in politics? so there will stibble the clashes. there may be a week or so before people start judging others' motives. it is possible this could become an annual tradition. one said i like this, we should do it every year. gwen: yeah, probably more the moderates than the ones up for re-election. >> right. gwen: but on than issue of re-election, thank you noint 20 1 -- shall in the last election

cycle, hillary clinton had already announced her candidacy. >> well, someone was saying six to eight months, that's all the time we have before that 2012 locks everything up and makes foreign policy and domestic policy different, before we all get consumed with the next presidential race and it becomes hard to do. gwen: so what's in everyone's agenda the next six to eight months in? certainly what's going to happen is this whole budget fight is going to come to a head over the question of whether or not we increase the debt limit so that the government can continue to borrow to meet existing obligations, forget new spending. gwen: that's a political and philosophical fight. and it's certainly going to be raised because if it's not, we've got catastrophe. that will be the moment and it could come as early as late

march when each side is going to try to force action. the republicans are going to demand certainly -- things in return, spending cuts. but what happens between now and then will determine just how the fight, the specifics of the fight -- because the republicans will have two more months to try to come up with specific spending cuts that they haven't so far been able to do. gwen: and republicans and democrats then may be fighting among themselves as a little bit. we heard harry reid say this week, earmarks, that's for us, president, -- mr. president, not for you. >> i think he spoke for a lot of people there. on the house side, there is willingness to go along with the earmarks ban but in private they recognize that's not what is causing the deficit problems in the country. i think ear marks to the public in particular have just become

symbolic of government exses. -- excess. gwen: and thear the prerogatisk of congress, not the executive brafrpblt thank you, everybody. we got a lot in. our conversation continues on line. check out. the podcast and follow us on facebook and twitter. we'll be keeping an eye on events in washington and egypt and then catch you up on developments around the table next week on "washington week." download our weekly podcast and take us with you. at "washington week" on line at pbs.org. captioned by the national captioning institute --www.ncicap.org-- of funding for wolfpack swook provided by -- this rock has never stood

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